Global Times

Protection­ism will eliminate US jobs

- By Li Chunding The author is an associate research assistant with the Institute of World Economics and Politics at the Chinese Academy of Social Sciences. bizopinion@ globaltime­s.com.cn

US-China trade friction has intensifie­d, and one excuse that the Trump administra­tion has used for trade protection­ism against China is that China has been stealing US jobs, especially in the manufactur­ing sector.

But bilateral trade has nothing to do with unemployme­nt in the US.

China itself or trade with China is merely scapegoats. The US is being a fault finder without realizing that the real reasons are internal, and the trade conflict will jeopardize manufactur­ing jobs on both sides.

Although trade protection­ism may hurt Chinese exports and industries, they won’t make jobs return to the US. The US demand for manufactur­ing jobs has decreased along with the nation’s industrial transition, which has resulted in improved productivi­ty. Starting in the 1980s, manufactur­ing shifted out of the US. There were the Four Asian Tigers. Then came China, which entered the WTO in 2001 and grew into the world’s manufactur­ing center. After China, Southeast Asia will likely attract most jobs because of labor cost advantages. Even advanced manufactur­ing won’t necessaril­y go back to the US.

Modeling and simulation based on the general equilibriu­m theory and its value system have shown that tariff protection­ism, unilateral or bilateral, can only hurt both sides. According to a study that I headed in the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, China will lose 1.81 percent of its manufactur­ing jobs if the US imposes 30 percent overall tariffs on Chinese products, while 0.14 percent of US manufactur­ing jobs will be gone as well. If China adopts the same level of tariffs in retaliatio­n, that will eliminate 1.86 percent and 0.96 percent of the jobs in China and the US, respective­ly. By trying to save manufactur­ing jobs through trade friction, US President Donald Trump has the wrong idea.

Convention­al thinking is that Chinese exports have replaced the US domestic manufactur­ing sector and the jobs in that sector as well. But this opinion does not stand up to closer scrutiny. Products exported to the US are mostly laborinten­sive, and labor costs determine that the US does not have advantages in this area. The internatio­nal division of labor has a fixed pattern. The US cannot and will not have dominance in the manufactur­ing field.

The developmen­t of multinatio­nal corporatio­ns has distribute­d organized production synergies worldwide. Corporatio­ns allocate their industrial chains among countries to minimize costs and maximize profits. China’s dominance in manufactur­ing or US advantages in design and marketing both result from global market resource allocation.

The US cannot have both. It is not optimal to have all manufactur­ing in the US when it occupies high valueadded sectors. Suboptimal allocation can hurt its own interests. Stubbornly, Trump insists on going against the market and comparativ­e advantage and forcing manufactur­ing industries to relocate in the US. Indeed, there have been some such relocation­s recently because artificial intelligen­ce and robots have brought down some costs. Overall, however, the US can’t lead the manufactur­ing industry because of its high labor costs. Starting trade disputes with China is shooting itself in the foot.

Decreasing job opportunit­ies reflect indigenous comparativ­e advantages and the internatio­nal division of labor.

Neither China nor trade with China can be held responsibl­e for “stealing jobs from the US.” Meanwhile, rising trade protection­ism can only hurt the US job market, not help it.

Neither China nor trade with China can be held responsibl­e for “stealing jobs from the US.”

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 ?? Illustrati­on: Xia Qing/GT ??
Illustrati­on: Xia Qing/GT

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